Isis enters collaboration with GlaxoSmithKline

Carlsbad biotech signs with GlaxoSmithKline

The Carlsbad biotechnology company Isis Pharmaceuticals announced a deal yesterday under which drug giant Glaxo- SmithKline will back Isis’ search for drugs in a number of new areas with the option for the larger company to license the drugs if the work goes well.

Isis termed the arrangement, under which it gets $35 million upfront with the potential for more to follow, as a “preferred partner relationship.” It differs from the typical biotech partnership deal in which a larger company licenses a drug that is already well into development.

That kind of deal can carry a bigger price tag, but Isis said one advantage of the new arrangement is that the company reduces its financial risk by bringing in research dollars early on. It also gets Glaxo onboard early, potentially making the development process go more smoothly.

“We and GlaxoSmithKline believe this will result in a much more efficient drug discovery and early development program,” Isis Chief Executive Stanley T. Crooke said on a conference call. “This of course benefits both companies.”

Isis said the total funding under the agreement could reach $1.5 billion, but that’s only under a best-case scenario in which a half-dozen drugs reach the market and meet their sales targets. The program covers five areas initially, with the potential to add a sixth.

Isis will control the development programs up to midstage trials, with the potential to receive up to $20 million in milestone payments per program up to that point. Then GlaxoSmithKline would decide whether to license the drugs, with potential license fees, additional milestone payments and possible double-digit percentage royalties to follow.

John McCamant of the Medical Technology Stock Letter in Berkeley said in a research note that the terms are attractive for Isis.

“Now is a particularly good time for Isis to form such collaborations as they do not need cash in the form of big upfront payments to pay their bills and can instead receive better downstream economics,” McCamant wrote. “Double-digit royalties on drug development candidates that have not even been discovered yet are as good a terms as we have ever seen Big Pharma relinquish to a biotech.”

The deal builds on an unusual “antisense” drug discovery approach Isis uses that involves manipulating genetic code to block disease. The company has used the technique to develop a pipeline of experimental drugs for conditions that include diabetes, cancer and other ailments but has yet to score a commercial success.

GlaxoSmithKline has previously entered partnerships with another antisense company, Carlsbad’s Regulus Therapeutics, that is a joint venture between Isis and Alnylam Pharmaceuticals of Cambridge, Mass. A 2008 deal included $20 million in upfront payments, and the companies announced a further collaboration this year.

Under the partnership announced yesterday, Glaxo is enlisting the help of Isis itself in applying antisense to areas that include rare diseases with relatively small markets, infectious diseases and some conditions causing blindness. Isis did not disclose the specific drug targets.

The large antisense drug pipeline Isis has built has enabled it to bring in research dollars from a long list of partners. The company had accumulated $574 million in cash to fund its work as of the end of last year despite not having a commercial product.